The projected fair value for Casey's General Stores is US$418 based on 2 Stage Free Cash Flow to Equity
Current share price of US$386 suggests Casey's General Stores is potentially trading close to its fair value
The US$397 analyst price target for CASY is 5.0% less than our estimate of fair value
How far off is Casey's General Stores, Inc. (NASDAQ:CASY) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
What's The Estimated Valuation?
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) forecast
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF ($, Millions)
US$427.3m
US$495.8m
US$535.1m
US$534.8m
US$558.7m
US$576.7m
US$594.1m
US$611.1m
US$627.9m
US$644.7m
Growth Rate Estimate Source
Analyst x3
Analyst x4
Analyst x1
Analyst x1
Analyst x1
Est @ 3.23%
Est @ 3.01%
Est @ 2.86%
Est @ 2.75%
Est @ 2.68%
Present Value ($, Millions) Discounted @ 5.8%
US$404
US$443
US$452
US$427
US$422
US$411
US$400
US$389
US$378
US$367
("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = US$4.1b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.5%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 5.8%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$20b÷ ( 1 + 5.8%)10= US$11b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$16b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$386, the company appears about fair value at a 7.6% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
Important Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Casey's General Stores as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 5.8%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Casey's General Stores
Strength
Earnings growth over the past year exceeded the industry.
Debt is not viewed as a risk.
Balance sheet summary for CASY.
Weakness
Earnings growth over the past year is below its 5-year average.
Dividend is low compared to the top 25% of dividend payers in the Consumer Retailing market.
Opportunity
Annual earnings are forecast to grow for the next 3 years.
Current share price is below our estimate of fair value.
Threat
Annual earnings are forecast to grow slower than the American market.
What else are analysts forecasting for CASY?
Next Steps:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Casey's General Stores, there are three further items you should explore:
Risks: Every company has them, and we've spotted 1 warning sign for Casey's General Stores you should know about.
Future Earnings: How does CASY's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
主要見解
Casey's General Stores的預期公允價值爲418美元,基於2階段自由現金流向股本
當前的386美元股價表明Casey's General Stores可能接近其公允價值交易
CASY的397美元分析師目標價比我們的公允價值估計低5.0%
Casey's General Stores,Inc. (納斯達克:CASY)距離其內在價值有多遠? 使用最新的財務數據,我們將通過預測其未來現金流並將其貼現到今天的價值來研究該股票是否定價公平。 我們的分析將採用貼現現金流(DCF)模型。聽起來可能有點複雜,但實際上非常簡單!
("Est" = Simply Wall St 估計的自由現金流增長率) 未來10年現金流的現值(PVCF) = 美元4.1億
現在我們需要計算終值,這將考慮到這十年之後的所有未來現金流量。出於多種原因,我們使用了一個非常保守的增長率,不能超過一個國家的 GDP 增長率。在這種情況下,我們使用了十年期政府債券收益率(2.5%)的五年平均值來估計未來增長。與十年增長期相同,我們將未來現金流折現到今天的價值,使用權益成本爲5.8%。
上述計算非常依賴於兩個假設。一個是折現率,另一個是現金流。投資的一部分是對公司未來表現進行自己的評估,因此請自行嘗試這個計算,並檢查您自己的假設。貼現現金流也沒有考慮行業可能的週期性,或是公司未來的資金需求,因此並不能全面反映公司的潛在表現。鑑於我們正在考慮 Casey's General Stores 作爲潛在股東,所以使用權益成本作爲折現率,而不是成本資本(或加權平均資本成本,WACC),WACC考慮了債務。在這個計算中,我們使用了5.8%,這是基於0.800的槓桿貝塔得出的。貝塔是股票波動率的衡量標準,與整個市場相比。我們從全球類似公司的行業平均貝塔獲得我們的貝塔值,強制的範圍在0.8和2.0之間,這對於一個穩定的商業來說是一個合理的範圍。
Casey's General Stores的SWOT分析
優勢
過去一年的收益增長超過了行業板塊。
債務不被視爲風險。
CASY的資產負債表摘要
弱點
過去一年的盈利增長低於其5年平均水平。
與消費零售市場前25%的分紅支付者相比,該公司的股息較低。
機會
預計未來3年的年度收益將增長。
當前股價低於我們估計的公平價值。
威脅
預計年度收益增長速度將慢於美國市場。
分析師對CASY還預測了什麼?
下一步:
儘管公司的估值很重要,但在研究一家公司時不應只看這一指標。使用DCF模型無法得到絕對可靠的估值。最好是應用不同情景和假設,看看它們對公司估值的影響。如果一家公司增長速度不同,或者其權益成本或無風險利率發生急劇變化,結果可能會截然不同。對於Casey's General Stores,還有三個進一步的項目您應該探究:
風險:每家公司都存在風險,我們已經發現了Casey's General Stores的1個警告信號,您應該知道。